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TMI Blog2012 (6) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Benefit of +/- 5% adjustment u/s 92C(2) - AY 2006-07 - assessee contended for standard deduction of 5% as provided under erst while proviso to section 92C(2) before making adjustment for the transfer price on ground that amendment brought in by Finance (No: 2) Act of 2009 is prospective in operation and will be applicable from AY 2009-10 and onwards - Held that:- Proviso is not a procedural piece of legislation and therefore, unless it is so clearly intended, the newly amended proviso cannot be understood to be retrospective in nature. In fact, it is a well-settled proposition that the statutory provisions as they stand on the first day of April of the AY must apply to the assessment of the year and the modification of the provisions during the pendency of assessment would not generally prejudice the rights of the assessee. We therefore find no justification to deny the benefit of +/-5% to the assessee in terms of the erstwhile Proviso for the purposes of computing the ALP - Decided in favor of assessee. - IT APPEAL NO. 1369 (BANG.) OF 2010 - - - Dated:- 30-4-2012 - N. K. Saini And George George K., JJ. Rajan S. Vora for the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. the learned AO/TPO have erred in ignoring the fact that since that Appellant is availing tax holiday u/s 10A of the Act, there is no intention to shift the profit base out of India, which is one of the basic intention of the introduction of transfer pricing provisions; Grounds of objections relating to Cost Plus Method ( CPM )/Comparable Uncontrolled Price Method ('CUP'). 6. the learned AO/TPO erred in rejecting the methodology as adopted by the Appellant and using Transactional Net Margin Method ( TNMM ) as the most appropriate method for determining arms length price. Grounds of objections relating to TNMM: 7. the learned AO/TPO erred in disregarding the economic analysis undertaken by the Appellant and conducting a fresh economic analysis for the determination of the arm's length price in connection with the impugned international transaction; 8. the learned AO/TPO erred in determining the arm's length margin price using only financial year 2005-06 data, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements; 9. the learned AO/TPO erred in rejectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law. 3. Ground No.1 is general in nature and ground No.18 is not arising out of the impugned order, so no finding is given for these grounds. 4. Vide ground Nos. 2 3, the grievance of the assessee relates to the action of the Assessing Officer in excluding foreign currency expenses from export turnover and not from the total turnover while computing deduction u/s. 10A of the Act. 5. The facts related to this issue in brief are that the assessee filed its return of income on 27.11.2006 declaring an income of ₹ 2,07,682, which was processed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the Act , in short ]. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had not computed the export turnover as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same ratio as the export turnover bears to the total turnover, in short by apportionment. Reliance was placed on the ITAT Chennai Bench decision in the case of California Software Co. Ltd. v. Asstt. CIT [2009] 27 SOT 51 (URO). 8. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is not in dispute that the assessee claimed deduction under section 10A of the Act, however, the Assessing Officer while framing the assessment under section 143(3) of the Act computed the deduction under section 10A of the Act by reducing lease line charges from export turnover, but not from the total turnover. 9. This issue now has been settled by the Special Bench of ITAT, Chennai in the case of Sak Soft Ltd. ( supra ) (Chennai) (SB) by holding as under : To say that in the absence of any definition of total turnover for the purpose of section 10B, there is no authority to exclude anything from the expression as understood in general parlance would be wrong, as there has to be an element of turnover in the receipt if it has to be included in the total turnover. That element is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions bring fulfilled and in that sense they are of the same genre. The object of these sections is to encourage the earning of foreign exchange and provide incentive to promote exports. If some of the sections such as sections 80HHE and 80HHF provide for a formula for calculating the deduction which is identical with the formula prescribed by section 10B, it would be incongruous to interpret section 10B in a manner different from those two sections merely because there is no definition of total turnover in that section. Export turnover as defined in these sections excludes freight, telecom charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India. Thus statutory parity is maintained between export turnover and total turnover in these sections. There is no reason why such parity cannot be maintained between export turnover and total turnover in section 10B just because total turnover has not been defined in that section. ' 10. Similar view has been taken by the Hon'ble High Court of Bombay in the case of Gem Plus Jewellery India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. The legislature has provided a definition of the expression export turnover in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the revenue is that while fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rystal clear that if an item is excluded from the export turnover, the same should also be excluded from the total turnover to maintain parity between the numerator and denominator while calculating the deduction under section 10A of the Act. In view of the above, we set aside the order of the lower authorities on this issue and direct the Assessing Officer to reduce the expenses incurred on tele/internet charges in regard to delivery of software abroad, travelling expenses which includes payment made in foreign currency on visit of its employees to render technical assistance to its clients abroad and other onsite expenses amounting to ₹ 11,45,37,299 both from export turnover as well as total turnover. 13. Vide grounds 4 to 15, the grievance of the assessee relates to determination of arms' length margin/price (ALP). 14. The facts related to this issue in brief are that since the assessee entered into international transaction as specified in section 92(B) of the Act, therefore the AO referred the case to the Transfer Pricing Officer (TPO), who determined the ALP in respect of software services at ₹ 39,44,35,674 as against ₹ 35,17,92,120 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was emphasized that no adjustment was made to take into consideration unproductive and idle hours and the differences in risks assumed since the upper range of transfer price at USD 26.24 had been established by the assessee in comparison to the rate of comparable companies in the range of USD 4.00 to USD 31.16, therefore, the total price arrived at under CUP/CPM was established at arms' length. It was argued that the TPO had not accepted the economic analysis undertaken by the assessee and conducted a fresh economic analysis by rejecting the CUP/CPM analysis carried out by the assessee and applied Transactional Net Margin Method (TNMM) as most appropriate method. It was further argued that the TPO had obtained information u/s. 133(6) of the Act, which were not available in the public domain and used the same for judging comparability with the assessee. It was stated that the TPO applied certain filters and rejected certain companies selected by the assessee by using the following criteria: - Companies having a turnover less than 1 crore; - Companies having economic performance contrary to the industry behaviour (e.g. companies which showed a diminishing revenue tren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of services especially for contracted research and development was involved. It was stated that since the company was dedicated captive service provider under long term service arrangement and the final output being unfinished i.e., not marketable, the Cost Plus Method was the most appropriate method and even the TPO agreed the difference between the two methods i.e., CUP and TNMM in the assessee's case was only of academic interest. A reference was made to page 9 of TPO's order. It was accordingly submitted that the CPM method adopted by the assessee was the right method and should not have been rejected. 18. It was submitted that additional supplementary analysis was undertaken using the hourly rate for the rates charged by the assessee to the parent company and the computation of man hour rates had been arrived at as per the information available from the public domain, such as annual reports published, those were selected on the basis of those companies which were major industry players and no filters had been applied while selecting those companies. It was reiterated that the hourly rate of comparable companies was in the range of USD 4 to USD 31.16 while t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons:-- - Analysis undertaken in accordance with the law. - Analysis undertaken by an external agency. - AO/TPO had no reasons to believe that the transactions were not at arms' length. 19. Ld. counsel for the assessee contended that the TPO had rejected the companies with less than ₹ 1 crore turnover on the ground that the margin earned by those companies fluctuate to extremes because of narrow base and that the reliability of the data in respect of the small companies was not always high and lack of competitive strength, operational efficiencies and reliability of financial data was significantly reduced because the same persons were often major shareholders as well as key employees with diminishing the economic destruction between profit and balance. It was further stated that while applying TNMM method for determination of ALP, differences on account of turnover were neutralized by use of comparables having both high and low turnover than that of the tested party and a turnover filter had been employed for the tested party was a risk bearing entrepreneur assuming risks and rewards of scale. Therefore a turnover criteria should not have been app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available or disclosed in the financial statements of most of the companies, but those were gathered by the TPO by exercising power conferred u/s. 133(6) of the Act, therefore it was not appropriate to reject the companies providing onsite services on the ground of functional dissimilarity, when the nature of activity they performed still remained software development . 21. It was also submitted that the TPO adopted employee cost filter where companies with employee cost less than 25% of the total revenues were rejected as a comparable by stating that on an average salary cost comprises of 24% to 42% of the revenue in the case of a software service provider. It was stated that the TPO did not consider that there was no mandatory norm to govern the disclosure relating to employee costs, particularly when companies followed different model in disclosing the expenses and might have shown employee cost as a separate item in their financial statements and some other companies might have aggregated it under other expenses heads such as 'administrative expenses', 'sales and marketing expenses', etc., therefore it was not appropriate to use employee cost filter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was further stated that the TPO considered Infosys Technologies Ltd. (Infosys) as comparable, but the said company was having software services revenue at ₹ 9000 crores as compared to the assessee's ₹ 35 crores and the profit margin of the said company was at 40.38%, therefore the said company was also not comparable with the assessee. 25. Another related instance quoted of comparable was of M/s. Tata Elxsi Ltd. and it was stated that the said company was having two segments; one was system integration services and another software development and services. It was stated that the TPO considered the software development services segment as comparable which comprises of hardware, software and IT enabled services/activities, but the assessee had not rendered any hardware related or IT enabled services, therefore the said company could not have been considered as comparable as it was functionally different. 26. One another instance quoted was of Flextronics Software Systems Ltd. wherein the informations were obtained u/s. 133(6) of the Act, but those were not available in public domain. 27. It was contended that if the aforesaid 6 compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the TPO did not consider the foreign exchange fluctuation gain (loss) as well as provision written back as part of the operating income while computing operating margin. It was pointed out that the TPO has considered extra-ordinary items for computing the operating margins while dealing with the comparable iGate Global Solutions Ltd., that company was introduced as a comparable after conducting a fresh economic analysis and obtaining relevant segmental information u/s. 133(6) of the Act. By including the said company as comparable, the TPO determined the operating margin as 15.61% on cost instead of correct margin of 2.81%. Therefore the TPO was not justified in computing the operating margin. 31. It was further stated that the TPO had not made suitable adjustment on account of difference in the risk profile of the assessee vis- -vis comparables like conducting comparability analysis. It was further stated that rule 10B(1)(e)(iii) of the I.T. Rules, 1962 provides that adjustment should be made to the profit margin of independent comparable companies to take into account the difference in functions and risks and that the international commentary on TP also recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k adjustment should have been accorded to the assessee. Reliance was placed on the following case laws:- - Sony India (P.) Ltd. v. Dy. CIT [2008] 114 ITD 448 (Delhi) - Philips Software Centre (P.) Ltd. ( supra ) 32. It was further stated that the assessee computed risk adjustment in its case vis- -vis comparable companies and provided the same to the TPO/AO, however the same had not been accepted by the TPO/AO. It was also stated that the assessee had filed detailed submissions with the DRP on Capital Assets Pricing Model (CAPM) to make appropriate adjustment to margins on account of risk differentials in the case of comparable companies, however the DRP without considering the submissions made by the assessee on CAPM had passed the directions. Accordingly it was stated that the directions may be given to the Assessing Officer to allow risk adjustment to the assessee. 33. In his rival submissions, the ld. CIT(DR) strongly supported the orders of the authorities below and further submitted that the assessee is a captive service provider rendering its entire software services to its parent company for improving software for the use in automobile/airc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p in computing ALP by considering any other uncontrolled transaction or enterprises. It was stated that CUP method is one of the additional method for determining the ALP and this method is to be applied in the manner provided in Rule 10B(1)(a) of I.T. Rules, 1962. It was further stated that in CUP method, the price charged or paid, property transferred or services provided in a comparable uncontrolled transaction or number of such transactions are identified, thereafter some adjustments are made in that price on account of factors which could materially affect the price in the open price and the said price so adjusted would be the ALP in respect of the property transferred or services provided in the international transaction. It was further stated that the uncontrolled transaction should reflect goods of similar type and quantity as most between the AEs and relate to transactions taking place at a similar time and stage in the production/distribution gain with similar condition applying. It was pointed out that in the instant case the assessee accepted that the margin charged by other companies rendering software services was not comparable to its situation in the absence of many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Asstt. CIT [2011] 45 SOT 471/10 taxmann.com 161 (Bang.) - HoneyWell Automation India Ltd. ( supra ) - Haworth (India) (P.) Ltd. v. Dy. CIT [2011] 131 ITD 215/11 taxmann.com 76 (Delhi) - Dy. CIT v. BP India Service (P.) Ltd. - ITA No.4425/Mum/2010. 35. It was stated that the ld. counsel for the assessee raised several objections on six comparable companies viz., M/s. Megasoft Ltd., M/s. KALS Information System Ltd., M/s. Accel Transmatic Ltd., M/s. Tata Elxi Ltd., M/s. Infosys Technologies Ltd. and Floctronics Software System Ltd. and asked for exclusion of these from comparables. In this regard, it was submitted that M/s. Megasoft Ltd. has furnished segmental information in pursuance to notice issued u/s. 133(6) of the Act and clarified that Blue Ally Division is an offshore and on limit consulting division and does jobs based on customers requirements and billing done on hourly basis, while XIUS-BCCIL was a product which caters the need of mobile software industries and the said product was to be customized to the requirement of each customer which indicated that the products of the said company i.e., M/s. Megasoft Ltd. were in the form of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment services. Therefore getting higher turnover did not necessarily mean that it would generate higher margin. It was further stated that the assessee had not demonstrated as to how the difference in turnover has influenced the result of the comparables. The ld. CIT(DR) contended that it is accepted economic principle and commercial practice that in highly competitive market conditions one can survive and sustain only by keeping low margin but high turnover. Reliance was placed on the decision of ITAT Mumbai E Bench in the case of Symantec Software Solution (P.) Ltd. ( supra ). It was further submitted that a mere higher profit margin cannot be a reason for elimination as a comparable. 40. Similarly for M/s. Flextronics Software System Ltd., the ld. CIT(DR) stated that its products revenue constitutes only 16.6% of the segmental revenue, therefore the software development services revenue in segment 'products and services' was 83.4% which was more than 75% and thus qualifies the TPO's filter for revenues from software development services, accordingly rightly considered as comparable. 41. The ld. CIT(DR) vehemently argued and stated that sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 44. As regards to the claim of the assessee for risk adjustment, the ld. CIT(DR) submitted that the TPO and DRP had rejected the assessee's claim on the ground that the assessee failed to bring any evidence on record to show that there existed any difference in the risk profile of comparable companies vis- -vis of the assessee. It was pointed out that in order to take benefit of this adjustment, information should have been submitted along with the details under rule 10D of the Income-tax Rules, 1962 by the assessee. It was also pointed out that as per the provisions u/s. 92D(I) of the Act, every person entering into an international transaction is required to keep and maintain such information and documents in respect thereof, as is being prescribed under rule 10D(1) of the Income-tax Rules, 1962. The said rule requires maintenance of a record of the analysis performed to evaluate comparable as well as a record of the actual working carried out for determining the ALP. It was further stated that the assessee admitted that they did not undertake any risk adjustment in TP document report, therefore in the absence of that comparability, it was difficult to make adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd only the Blue Ally Division of the said company should have been considered as comparable. Similarly the company KALS has products of its own and hence should have been rejected as comparable because a break-up of product and services revenue was not available. It was further stated that the TPO had selected companies for issuing notices u/.s 133(6) of the Act on an arbitrary basis, particularly the responses of M/s. Sankhya Infotech and M/s. Megasoft Ltd. obtained u/s. 133(6) of the Act could not have been relied upon as those companies had provided contradictory information in their responses to the notices issued u/s. 133(6) of the Act. It was further stated that the TPO had wrongly considered foreign exchange fluctuation and provisions written back as non-operating in nature, which are to be considered as operating in nature. Reliance was placed on the following case laws: ( i ) SAP Labs India (P.) Ltd. v. Asstt. CIT [2010] 44 SOT 156/[2010] 8 taxmann.com 207 (Bang) ( ii ) Gem Plus Jewellery India Ltd. ( supra ) ( iii ) Sony India (P.) Ltd. ( supra ) 47. The ld. counsel for the assessee further submitted that the assessee provided the working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables without affording opportunity to the assessee to present its objections to their adoption. It is well settled that nobody should be condemned unheard as per the maxim audi alteram partem , but in the present case nothing is brought on record to substantiate that the TPO/AO while adopting additional comparables had provided opportunity of being heard to the assessee. Therefore this issue deserves to be set aside to be decided afresh at the level of the Assessing Officer. For the aforesaid view, we are fortified by the order dated 31.01.2012 of the ITAT 'A' Bench Bangalore in the case of Genesis Microchip (I) Pvt. Ltd., Bangalore v. DCIT, Circle 11(3), Bangalore in ITA No.1254/Bang/2010 for the A.Y. 2006-07 . 19. In the present case, the AO adopted M/s. Infosys Technologies Ltd., KALS Information System Ltd., Accel Transmatic Ltd. and Tata Elxsi Ltd. as comparables on the basis of data which was obtained by him in response of the notices issued u/s. 133(6) of the Act, however no opportunity of being heard was provided to the assessee for rebuttal, therefore the Assessing Officer was not justified in considering those comparables while working o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the assessee is in appeal. 53. The ld. counsel for the assessee submitted that the assessee should have been given a standard deduction of 5% as provided under proviso to section 92C(2) of the Act before making adjustment for the transfer price. Reliance was placed on the following case laws: 1. Genisys Integrating Systems (India) (P.) Ltd. v. Dy. CIT [2012] 20 taxmann.com 715 (Bang.) 2. Tatra Vectra Motors Ltd. v. Dy. CIT [2012] 20 taxmann.com 131 (Bang.). 54. The ld. counsel for the assessee further submitted that the contention of the assessee was rejected by the DRP on the ground that amendment to proviso to section 92C was clarificatory in nature and therefore retrospective in effect. It was contended that the amendment to proviso to section 92C was not retrospective as clarified by the CBDT by way of letter No.F.142/13/2010-SO(TPL) dated 30.09.2010. The ld. counsel for the assessee contended that a deeming provision has been created to adopt an arms' length price if the price actually undertaken by the assessee does not exceed 5% of the amount at which international transaction has actually been undertaken instead of reckoning the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. ( supra ) - ADP (P) Ltd. ( supra ) 57. After considering the submissions of both the parties and material on record, it is noticed that a similar issue has been adjudicated by the ITAT 'A' Bench Bangalore having the same constitution in the case of Tatra Vectra Motors Ltd. ( supra ) for the A.Y. 2006-07 wherein the relevant finding has been given in paras 12 to 17 of the order dated 31.01.2012, which read as under: 12. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, the assessee has not disputed the adjustments u/s. 92CA of the Act, but challenging the working of ALP without giving benefit of the option available under the erstwhile proviso to section 92C(2) of the Act, so it becomes relevant to discuss the provisions contained in the erstwhile proviso to section 92C(2) of the Act, which was inserted by Finance Act, 2002 w.e.f. 1-4-2002 and reads as under: Provided , that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices, or, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate method is only an approximation and is not a scientific evaluation. Therefore, the Legislature thought it proper to allow marginal benefit to assessees who opt for such benefit. In the case of an assessee who exercises the option and accepts the arm's length price even exceeding 5 per cent of the arithmetic mean determined by the tax authority as correct and is ready to pay tax on the difference between the price disclosed by him and the arm's length price the application of the proviso is not excluded. The legal position cannot be different in a case where minor variation of 5 per cent is not accepted and the arm's length price is further challenged in appeal. The mere fact of acceptance or non-acceptance of the arithmetic mean cannot be taken to be the determining factor relating to the right to contest the arm's length price in appeal. Such inference is not supported by the language of the provision. Both in the first as also in the second limb, the implications of the determined the arm's length price are the same except for the marginal benefit allowed to the assessee under the second limb. Hence, the second limb of the proviso is applicable even to cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five percent of such arithmetical mean. As per the said Proviso, an option is available to the assessee for adjustment of +/-5% variation for the purposes of computing ALP. As per the Proviso, where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding 5% of such arithmetical mean. The point made out by the assessee is based on the latter part of the Proviso whereby an option is given to the assessee to take an ALP which may vary from the arithmetical mean by an amount not exceeding 5% of such arithmetical mean. Firstly, the claim of the Revenue is that such benefit is not available to the present assessee, because the price of international transaction disclosed by the assessee exceeds the marg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the insertion of the amended Proviso with effect from 1.10.2009. 22. We have carefully examined the rival stands on this aspect. The amended Proviso has been brought on the statute by the Finance (No. 2) Act, 2009 with effect from 1.10.2009. The Explanatory Notes to the provisions of Finance (No 2) Act, 2009 contained in circular No 5 of 2010 ( supra ) provides the objective behind the amendment of the Proviso. The Legislature noticed the conflicting interpretation of the erstwhile proviso by the assessee and the income-tax Department. The assessee's view was that the arithmetical mean should be adjusted by 5% to arrive at ALP, whereas the departmental view was that no such adjustment is required to be made if the variation between the transfer price and the arithmetical mean is more than 5% of the arithmetical mean. With a view to resolving this controversy, the Legislature sought to amend the proviso to section 92C(2), which has been reproduced by us in the earlier part of this order. In the said Circular, it has also been elaborated that the above amendment has been made applicable with effect from 1.4.2009 and will accordingly apply in respect of assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st October, 2009, the following date shall be read: 1st April, 2009 . In terms thereof, it is canvassed that the amended proviso has been made applicable with effect from 1.10.2009 and shall apply even to cases where proceedings were pending before the TPO on or after such date, irrespective of the assessment year involved and, therefore, in the instant case the benefit of the erstwhile proviso cannot be extended to the assessee. We have carefully pondered over the assertion made by the appellant that the Corrigendum is untenable in the eyes of law. Firstly, the said corrigendum does not bring out any preamble so as to throw light on the circumstances and the background in which the same has been issued. Secondly, it is well understood that the Explanatory Notes to the provisions of a Finance Act passed by the Parliament seeks to explain the substance of the provisions of the Act as intended by the Legislature. In fact, the Hon'ble Supreme Court in the case of K.P Varghese v. ITO 131 ITR 597 (Ker) emphasized the sanctity of the statements contained in the Explanatory Notes of the provisions and stated that the interpretation placed in such documents is binding int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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